STATE OF MINNESOTA

IN COURT OF APPEALS

A14-1284

Terminal Transport, Inc.,

Appellant,

vs.

Minnesota Insurance Guaranty Association,

Respondent.

Filed April 20, 2015

Affirmed

Stauber, Judge

Hennepin County District Court

File No. 27-CV-11-24506

Thomas J. Flynn, Richard J. Reding, Larkin, Hoffman, Daly & Lindgren, Ltd., 

Minneapolis, Minnesota (for appellant)

Kirsten Schubert, Forrest K. Tahdooahnippah, Dorsey & Whitney, Minneapolis, 

Minnesota (for respondent)

Considered and decided by Schellhas, Presiding Judge; Stauber, Judge; and 

Hooten, Judge. 

S Y L L A B U S

The Minnesota Insurance Guaranty Association (MIGA) is prohibited from 

covering any claims made against an insolvent insurer’s policy that has a deductible in 

excess of $300,000. Minn. Stat. § 60C.09, subd. 2(4) (2014).
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O P I N I O N

STAUBER, Judge

Appellant challenges the district court’s grant of summary judgment in favor of 

MIGA, which denied its request for coverage of a workers’ compensation claim after the 

insurance company that provided the insurance became insolvent, arguing that the district 

court erred by concluding that claim was not a “covered claim.” We affirm.

FACTS

Appellant Terminal Transport, Inc., (Terminal) is an over-the-road trucking 

company located in Roseville, Minnesota. Respondent MIGA is an organization created 

by statute to provide payment of covered claims to claimants or policyholders when an 

insurer is liquidated. Minn. Stat. §§ 60C.02, subd. 2; .04 (2014). All insurers providing 

certain lines of insurance pay an assessment to MIGA as a condition of their licenses to 

transact business in the state. Minn. Stat. § 60C.03, subd. 6 (2014). 

Because Terminal was a fairly small business, it contracted with a professional 

employer organization, Oxygen Unlimited, LLC, for human-resource services. Oxygen 

handled payroll, withholding, garnishment, and state taxes, employed workers and leased 

them to Terminal, and arranged for insurance coverage, including a workers’ 

compensation policy. Oxygen purchased the workers’ compensation policy from 

Imperial Indemnity and Casualty Insurance Co., for the period of March 31, 2009, 

through January 1, 2010. This policy included a deductible of $1,000,000, which reduced 

the premium paid by Oxygen and the human-resource costs billed to Terminal. 
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An employee was injured while working for Terminal during the policy coverage 

period and submitted a workers’ compensation claim. Although Oxygen assured 

Terminal that it would handle the matter, it went out of business and Imperial was 

declared insolvent by the State of Oklahoma before the claim was paid. 

Terminal tendered the claim to MIGA, which denied it because the workers’ 

compensation policy had a deductible in excess of $300,000, making it ineligible for 

coverage under the statute. Terminal challenged this decision, and MIGA affirmed the 

denial of coverage. Terminal initiated this action by complaint in December 2011. 

MIGA moved for summary judgment based on the statutory exclusion of coverage 

for policies that have a deductible greater than $300,000. Terminal argued that Oxygen 

was the insured and thus Terminal had no duty to pay a deductible to Imperial because 

Oxygen provided first-dollar coverage of all claims to Terminal. The district court 

granted summary judgment in favor of MIGA. This appeal followed.

ISSUES

I. Did the district court err in its construction of the insurance contract?

II. Did the district court err in its construction of Minn. Stat. § 60C.09 (2014)?

ANALYSIS

We review the district court’s grant of summary judgment de novo to determine 

whether there are any genuine issues of material fact and whether the district court erred 

in applying the law. Larson v. Nw. Mut. Life Ins. Co., 855 N.W.2d 293, 299 (Minn. 

2014). We view the evidence in the light most favorable to the nonmoving party. Id. 
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I.

This appeal involves both construction of a contract and a statute. An insurance 

policy is a contract to which general principles of contract law apply. Remodeling 

Dimensions, Inc. v. Integrity Mut. Ins. Co., 819 N.W.2d 602, 611 (Minn. 2012). This 

court reviews the district court’s interpretation of a contract as a question of law subject 

to de novo review. Caldas v. Affordable Granite & Stone, Inc., 820 N.W.2d 826, 832 

(Minn. 2012). A clear and unambiguous contract is enforced in accordance with the plain 

language of the contract; a reviewing court considers parol evidence or matters outside of 

the contract only when the contract terms are ambiguous. Id. Neither party here claims 

that the contract was ambiguous. 

Terminal argues that it is not the policyholder and it should not be constrained 

from obtaining coverage from MIGA for the injured employee’s claim. The policy 

identifies the insured as “Oxygen Unlimited, LLC [leasing company for] Terminal 

Transport, Inc.” Terminal is identified as the employee location tied to the policy. The 

policy defines “insured” as the party “named in item 1 of the Information Page”; Oxygen 

is listed as leasing company for Terminal. The policy also has additional endorsements 

to the standard policy language, including the “Minnesota Employee Leasing 

Endorsement.” This endorsement applies to leased employees and defines the “Client 

Company” as “the entity who obtains any or all of its employees from another entity 

under an employee leasing agreement and which is identified . . . in Item 1 of the 

Information Page.” The endorsement states that the workers’ compensation policy “will 

apply as though the client company is the employer and is insured under this policy.” It 
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again identifies Oxygen, the employee leasing company, as the “policy holder under this 

policy.” 

A second endorsement creates a deductible of $1,000,000; this endorsement is 

between Imperial, the insurer, and Oxygen, the named insured. The endorsement states 

that “[i]t does not affect, change or alter the rights of others under the Policy.” It also 

provides that “[t]he first Named Insured shown in the Information Page agrees and is 

authorized to pay all Deductible Amounts on behalf of all Named Insureds,” but “[e]ach 

Named Insured is jointly and severally liable for all deductible amounts under this 

Policy.” 

The plain language of the policy suggests that Terminal is not the named insured. 

But Minn. Stat. § 60C.09, subd. 1(c)(i) (2014), which defines the claims covered by 

MIGA, includes those made by an “insured beneficiary under a policy,” and Terminal 

clearly considers itself to be an insured beneficiary or it would have no right to argue that 

it should be covered under either the policy terms or by MIGA’s statutory duty. 

Even if Terminal is not an insured beneficiary, it is a third-party beneficiary under 

the policy. A stranger to a policy has no right to enforce contract terms, but “a third party 

may enforce a promise made for his benefit even though he is a stranger both to the 

contract and the consideration.” Caldas, 820 N.W.2d at 832 (quotation omitted). An 

intended third-party beneficiary may enforce a contractual promise if the parties to the 

contract manifest an intent to benefit the third party and performance of the contract 

promise will satisfy a party’s obligation to pay money to or perform an action for the 

benefit of the third party. Id. If Terminal is arguably not a named insured to this 
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contract, it is certainly a third-party beneficiary: both Imperial and Oxygen recognize an 

obligation to provide workers’ compensation coverage to Terminal, which is consistent 

with coverage requirements under Minnesota law. As a third-party beneficiary, Terminal 

would have the right to enforce the contract according to its terms, which include a 

$1,000,000 deductible. See In re Hennepin Cnty. 1986 Recycling Bond Litig., 540 

N.W.2d 494, 499 (Minn. 1995) (stating that the rights of third-party beneficiaries are 

measured by the contract terms). Under either analysis, Terminal is an insured 

beneficiary under the contract and thus is subject to the terms of Minn. Stat. § 60C.09.

II.

The district court determined that the policy contained a $1,000,000 deductible 

clause and that MIGA was therefore statutorily precluded from covering Terminal’s 

claim. We review the application of a statute to the undisputed facts of a case as a 

question of law, which is subject to de novo review. Davies v. W. Publ’g Co., 622 

N.W.2d 836, 841 (Minn. App. 2001), review denied (Minn. May 29, 2001). 

MIGA was created by statute “to provide a mechanism for the payment of covered 

claims under certain insurance policies” and “to provide an association to assess the cost 

of the protection [of claimants and policyholders] among insurers.” Minn. Stat. 

§ 60C.02, subd. 2. Entities created by statute have only the powers conferred on them by 

statute. In re Excelsior Energy, Inc., 782 N.W.2d 282, 289 (Minn. App. 2010). 

The legislature states what [an] agency is to do and how it is 

to do it. While express statutory authority need not be given a 

cramped reading, any enlargement of express powers by 

implication must be fairly drawn and fairly evident from the 
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agency objectives and powers expressly given by the 

legislature. 

Peoples Natural Gas. Co. v. Minn. Pub. Utils. Comm’n, 369 N.W.2d 530, 534 (Minn. 

1985). Thus, although the chapter regulating MIGA states that it is to “be liberally 

construed to effect [its] purposes,” Minn. Stat. § 60C.02, subd. 3 (2014), MIGA is 

nevertheless limited by its statutory authority. 

MIGA is deemed to be “the insurer to the extent of its obligation on covered 

claims.” Minn. Stat. § 60C.05, subd. 1(a) (2014). “Covered claims” are unpaid claims 

arising out of an insurance policy issued by an insurer that has become insolvent, if the 

claim is made by either a policyholder or an insured beneficiary under the policy. Minn. 

Stat. § 60C.09, subd. 1(a), (c)(i) (2014). Under this definition, Terminal has a covered 

claim; if it is not a policyholder, it is an insured beneficiary, because the policy was 

intended to provide Terminal with the workers’ compensation coverage it is legally 

obliged to maintain.

But the definition of “covered claim” is further limited to exclude “any claims 

under a policy written by an insolvent insurer with a deductible . . . of $300,000 or more, 

nor that portion of a claim that is within an insured’s deductible.” Minn. Stat. § 60C.09, 

subd. 2(4). Terminal’s claim for coverage is based on a policy that has a $1,000,000 

deductible. The statute excludes “any claims” under such a policy, not just claims by a 

policyholder; claims by an insured beneficiary under the policy also are limited by this 

language. See id. (emphasis added). There is no ambiguity in the statutory language.
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We are further persuaded by Goodyear Tire & Rubber Co. v. Dynamic Air, Inc., 

702 N.W.2d 237, 243 (Minn. 2005), in which the supreme court noted that MIGA’s 

obligations are subject to “substantial limitations and exclusions,” citing the exclusion of 

any claim made under a policy with a deductible of more than $300,000 as one example 

of a substantial limitation or exclusion. Id. The supreme court further commented that 

MIGA “does not provide the same level of protection to insureds that the policy issued by 

the insolvent insurer would afford had the insurer remained solvent.” Id. 

Under the plain language of the statute, any claim made against a policy that has a 

deductible in excess of $300,000 is not covered by MIGA. The district court did not err 

by concluding that Terminal’s claim is not covered under the terms of Minn. Stat. 

§ 60C.09, subd. 2(4). We therefore affirm.

D E C I S I O N

MIGA is prohibited by statute from covering claims made on a policy with a 

deductible in excess of $300,000, including claims made by an insured beneficiary who is 

not the policyholder.

Affirmed.